It’s these changes in latitudes, changes in attitudes
Nothing remains quite the same
With all of our running and all of our cunning
If we weren’t all crazy, we would all go insane
At the beginning of the global financial crisis, there was considerable debate over whether other national markets continued to be “coupled” with the US market. In the past, a common way of putting it was, “When the US sneezes, the rest of the world catches a cold.” Was this to happen again? Or had these other national markets “decoupled” from the US market? At the time, it looked to me as if the majority opinion was that these markets remained coupled to the US.
I thought the “either/or” debate was silly. Back in March of 2008, I wrote the following at Minyanville:
The current debate over whether or not emerging market economies are “coupled’ or “uncoupled” to the US misses the point. It suggests that this is an “either/or” situation. Nonsense. This is a transition from one to the other. The economies of emerging markets haven’t decoupled from the US economy, they’re decoupling. It’s a waste of our time to argue whether the transition is over (is a transition ever really over?), but it’s worth our time to accept that it’s underway.
Two and a half years later, I read a Bloomberg story titled, Wall Street Sees World Economy Decoupling From U.S. Well, better late than never. Nonetheless, I was amused to read, “The world has already become partially decoupled,” Nobel laureate Joseph Stiglitz, a professor at New York’s Columbia University, said in a Sept. 20 interview in Zurich. Partially decoupled? It still doesn’t sound like he understands it is a “process”. After all, I see no reason to believe that the process has now stopped at this point or is likely to reverse. I would have said, “The world is in the process of decoupling”, but okay, so be it. After all this time, it is at least good to know that folks are catching on, if only slowly.
One of the fundamental problems, the most important in my mind, is that we are “statistics junkies”. We want numbers. We may know that the numbers are based at least in part on guesswork, but if I could put up a graph showing a shift over time from “coupled” toward “decoupled”, I would attract more attention and I know that. But such a graph would have to be based on some statistic or set of statistics to be “convincing” to many and such does not exist beyond total guesswork.
In my mind, however, the real question of “decoupling” has nothing to do with statistics. Some stats may suggest it, some may not, but none are designed for that purpose. And those that might be used are likely to be “lagging indicators” and do not demonstrate where we are today or even where we are headed.
No, the real factor is the decoupling process in the minds of people globally. Decoupling will first occur there before it is seen in any statistics. People outside the US and for whom the US is a major market will not suddenly walk away from that market. But a shift in their attitude may be underway that will convince them to begin seeking decoupling, not just watch it as it happens. That makes good business and investment sense.
In more than four decades as an American working in nations outside North America and Europe, the 20th century global power center, I have plenty of experience with people in other nations, their attitudes toward the US from their various “latitudes”, and their future planning as it relates to the US. Over the years, I have developed a substantial network of friends and associates in a couple dozen nations who are open and frank with me on topics of importance. They trust me not to get angry or upset if they say something critical about the US.
Over the last couple years, especially throughout 2010, there has been a clear shift. People still have great respect for the US based on past performance, but some, as is the case in Panama where I live, have discovered that their economies have not been severely harmed by the debacle of the North Atlantic, both sides of The Pond. Their economies have continued to grow. Enough time has passed since “sub-prime mortgage” entered the public vocabulary in the autumn of 2007 for them to feel confident of the results. Others have felt some impact, not as much as they had feared, but enough to hurt. Their attitude is that this is their “wake-up call” to seek decoupling from the US market.
This is simple human behavior. You can find similar results in other “couples” from marriages to business partners. It does not always happen this way, but it does happen and it is happening. I see absolutely no reason for other markets, emerging or whatever you choose to call them, not to move in this direction. I see nothing yet to suggest they should turn back to the old style of thinking. I expect this psychological decoupling to continue until we no longer use a term like coupling, but use a broader term, perhaps networking or something along those lines.
The challenge to the US (and most certainly Europe too) is to stop worrying about “decoupling” and start doing what they need to do. They need to pull up their socks, get to work, and clean up the mess they have made for themselves.
Until then, they are have no claim to being “wizards of finance and investment”. If you are part of the audience, it looks too much like this.